Hello, welcome to Impact Insights, the podcast series of Astaire Investment Managers.

Today we will talk about private debt with Pierre Rousseg, a private debt investment manager at Estreya Investment Managers.

Demand for private debt is growing among investors in 2022, but what is driving this trend?

How to find compelling risk reward in private debt?

Thank you, Sylvia.

For the question, so private debt indeed has demonstrated its ability to generate very attractive risk-adjusted returns, whilst diversifying away from traditional asset classes,

such as public bonds and equity.

So by taking on illiquidity,

the coupon are priced well above fixed income

and experience a much lower volatility of returns,

by tool strategy and discipline asset selection has shown to be robust.

Factoring return is only one piece of the puzzle.

But credit risk, in addition to diversification across borrowers, sectors and the sustainability

disclosure of the investment become the norm and need specialization.

Indeed, very few borrowers have an external credit rating.

So to judge whether the return is compensating the investor for the risk taken,

specialized asset manager through equivalent internal rating methodology

can map the credit risks to external ratings.

This is achieved based on bottom-up analysis of, first of all, financing risks, using metrics

comparison, such as the instrument seniority, the level of leverage multiples, the duration,

the security and the level of covenant package in place.

In the meantime, it is key to take a view whether the instruments is actually appropriate for the underlying

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